A company director is appointed to a limited company to manage the day-to-day business activities and finances and to ensure all statutory filing obligations are met. Directors must act lawfully and honestly and make decisions for the benefit of the company and its members. Using their skills, experience and judgment, directors must try to make the company a success by promoting and achieving its business objectives.
The statutory duties of a company director
The duties and responsibilities of a company director are set out in the Companies Act 2006, the articles of association and any service contract that is put in place between a director and the firm. The Companies Act 2006 outlines a statutory regime for directors’ duties, which consists of seven principle requirements:
- To act within the powers granted to them in the articles of association.
- To promote the success of the business.
- To exercise independent judgement in all decision-making.
- To use reasonable care, skill and diligence at all times.
- To avoid or declare any conflict of interest.
- To avoid the acceptance of benefits from third parties or using their position to make private profits.
- To declare an interest in a proposed transaction or arrangement with the company before it enters into such a transaction.
The management duties of a company director
A company’s articles of association provides supplementary information about directors’ rights, duties, and powers as authorised by shareholders in accordance with the provisions of the Companies Act. These general management duties may include:
- Making decisions for the benefit of the company and its owners, and considering the interests of creditors in all decision-making.
- Maintaining the company’s registered details and reporting changes to Companies House and HMRC
- Maintaining statutory company records and making them available for inspection, including the PSC register.
- Keeping accurate accounting records.
- Monitoring the financial position of the company.
- Taking all reasonable steps to minimise losses if the company is facing financial difficulty.
- Filing annual accounts, an annual confirmation statement (previous the annual return), and Company Tax Returns by the given deadlines.
- Paying corporation tax and any other tax liabilities by the given deadlines.
- Arranging general meetings and board meetings.
- Arranging and distributing minutes of meetings.
- Filing copies of resolutions with Companies House.
- Appointing solicitors, accountants and auditors, if required.
- Maintaining company stationery.
- Providing members (shareholders/guarantors) with copies of annual accounts.
- Issuing and/or transferring shares.
- Complying with employment law if the company has employees.
- Responsible for health and safety of all employees.
- Appointing a company secretary, if required.
How many directors are required to register a limited company?
A minimum of one director is required to register a company. There is no statutory limit to the number of directors a company appoints during or after incorporation, but there must always be at least one natural (human) director.
A single person can be the sole director and shareholder of a company. Alternatively, a company can have multiple directors and shareholders at the time of company formation and any time thereafter.
Who can and cannot be a company director?
A company director can be a person or a corporate entity, such as a group, partnership, organisation, charity, firm, another limited company, and any other form of corporate body. However, a company must always have a minimum of one natural director at all times.
- Individuals must be at least 16 years old.
- A director can also be a shareholder or the company secretary.
- The company auditor cannot be a director.
- An undischarged bankrupt cannot be a director.
- Any person who has been disqualified as the director of a company cannot be appointed to any other company whilst their ban is still in place.
Is there a minimum age requirement to be the director of a company?
A minimum age requirement of 16 was introduced in October 2008 under the Companies Act 2006.
Can a company director also be a shareholder?
UK company law permits private limited companies to be registered with only one director, who may also be a shareholder. It is, therefore, possible to set up and run a company on your own by assuming both positions.
What is the difference between a company director and a shareholder?
A shareholder owns all or part of a company. Directors are appointed by shareholders to manage all operational and financial aspects associated with running a company.
Can a director also be a company secretary?
Yes, a company director can also be the company secretary.
What is the difference between a director and a company secretary?
The burden of responsibility placed upon limited company directors is quite significant. For this reason, many directors appoint a company secretary to assist them with their statutory duties to reduce their workload to a manageable level.
Almost all directors’ duties can be delegated to a company secretary. However, legal liability for these statutory duties ultimately falls upon directors.
What is a corporate director?
A corporate director is the term used to describe a company, firm, or any other kind of corporate body that is appointed as the director of another company. A private company can appoint as many corporate directors as it wishes during or after company formation, provided there is always at least one appointed human director.
There are many advantages to appointing corporate directors, especially when a company is newly established. The expertise, support and guidance of a well-known corporation can be extremely beneficial to a company that is just starting out, and it can make a relatively unknown business more appealing and credible to consumers, suppliers, investors and lenders.
The role of a corporate director is exactly the same as that of a natural company director, but an authorised person must be nominated to act on behalf of the corporate director. This role will usually be assumed by a director or secretary of the corporate body.
It should be noted that the Small Business, Enterprise and Employment Act 2015 outlawed the use of corporate directors on UK companies. Whilst the legislation has come into the force the actual implementation of the ban has been postponed (currently it is unknown when this might change). As a consequence, it remains lawful to use corporate directors on your company, but the status of this ban should be routinely monitored going forward.
Are directors’ details placed on public record?
Yes, the following directors’ details are placed on public record by Companies House:
- Title, full forename(s) and surname, including any former name(s).
- Service address (residential or other).
- Month and year of birth.
- Appointment date.
- Date of appointment.
- Registered name and number of corporate director.
- Registered office or principal address of corporate director.
- Registration place of corporate director.
- Country of incorporation (non-UK Companies).
- Registration number (non-UK Companies).
- Legal Form (non UK and non-EEA companies).
- Governing law (non UK and non-EEA companies).